It's an interesting simulation, but fatally flawed by the assumption that transactions between actors are a zero sum game. It would be more realistic if it modeled the fact that wealth can be created and that actors transact only when the net outcome is more valuable to each of them.
Seems to model things like transactions in fixed resources like land pretty well.
In third-world countries we (the US) have repeatedly bought up land in exchange for short-term goods. The people in the country increasingly become dependent on providing services to the foreign land-holders, or factory work for the outside market.
Once they get fed up with this near-slavery they often try land reform, and that's when we send in the troops/CIA-paid thugs in the name of anti-communism (see Guatamala or Haiti as good examples).
It's like the Asimov story where aliens offer to extend humans' life by ten years for a price in natural resources, which they repeatedly double every ten years. Every resource on earth is eventually strip-mined, life can no longer be supported, and the aliens just move on to the next "voluntary" target.
The WTO plays a big role in these kind of attacks on societies as well. Of all the third-world countries that have developed, they have almost uniformly made heavy use of protectionism, foreign-ownership limitations, etc. The Seattle WTO protests in the 90's were actually seeded with some really interesting arguments and analysis.
Still focusing on land, but bringing things back towards Norvig's simulation (lots of individual actors), Thomas Paine's short essay, "Agrarian Justice," has some good descriptions of what goes on and offers some pretty good solutions.
Land values are f(productivity, past productivity).
That is they are derivatives of income and wealth.
Notwithstanding the critique of the author, the GP has a point that the science of economics is about the relationship between (production, distribution).
Eliminate that feedback loop, and ... yes, you are just looking at the diffusion of "fake games" people play.
Which are only insightful in the assumptions, but broadly speaking, not so much
All of that in mind, this type of essay/article is just a demonstration of ~technique in a very broad sense.
Its useful to mention/caveat any extrapolations are problematic, but no need to dwell or be overyly crtitical here. IMHO.
I don't think the parent meant that land has fixed value, but that we can't willy-nilly create more of it through the sweat of our brow, in the way that we could make more widgets.
This is one of the reasons that a lot of economic models depend on land: there is a very real scarcity there to drive the equations with, and it forms a foundation for virtually every other form of scarcity besides labor.
More subtle is the point, particularly in early economic thought, that land is a proxy for the master economic input: energy.
With sufficient energy, you can provide other inputs (raw materials, labor, capital). Without it, you're sunk.
In a preindustrial society, energy == land (and sea), in the form of food and fuel production (agriculture, grazing, fuelwood, wild herds, fish, all by way of direct or indirect sunlight conversion), as well as in the form of wind and water power resources which can be tapped through mechanisms. Ricardo's "law of rent" was in part a lament that all the good ones -- that is, most productive acres -- are taken. He was complaining about asset allocation in his day (he also saw economic surpluses accruing to landowners and labor rather than hard working capitalists and bankers, which is a tad curious).
With an industrialized society, energy's become something we extract from the land (coal, oil, gas, uranium), rather than which is produced or converted by it. But the fundamental truth remains.
In a future sustainable world, we'll again either be at the point where what we take from the land matches the rate at which it's created, or we'll have found some entropy gradient so abundant (fusion? thorium?) that it can be used extractively for tens to hundreds of thousands of years or more without exhaustion, despite the very formidable technical challenges to its utilization.
My leaning is more toward the former than the latter.
I've been exposed to the idea of an energy-backed currency since reading Arthur Clarke's Imperial Earth as a kid (it's actually got a lot to do with energy economics in general, among other themes).
More recently I've been looking at some of the principles of dissipative systems and wondering if one of the fundamental inequality equations of that field isn't applicable as a general concept of capital accumulation. Let's see if I can't find that ... OK: the storage function here:
I've also been kicking around the ideas of, variously, an organism (say, a human), or a herd, or an ecosystem, as an economic analog, and trying to figure out what the equivalent systems within them are. For the body analog, there's the long-standing metaphor within economic literature of the banking system and money as the heart and blood. My read is that these are mistaken -- those correspond to physical constructs within the economy (transportation systems and energy), not the control and signaling systems of the economy. There I think you'd want to map something more on the lines of Ca+ ion exchange or endocrine signaling, though honestly my understanding of biology and systems is pretty loose. I've been meaning to look at how biological and ecological systems signal for resource utilization.
I was thinking just take the ledger of all transactions and exclude everything but land transfers.. that doesn't work though because none of his transaction functions would properly model the way the real land transactions would happen due to feedback with the hidden transactions etc.
I guess the Norvig approach would be to feed in all data from the real economy and tally random sequences of transactions of various lengths, like linguistic n-grams, then for the model just generate transactions using Markov chains derived from that data. If it works for translating languages and modeling human thought, no reason it shouldn't work here.
Suppose actor A has no land and $1000 in cash, and actor B has $500 worth of land and $500 in cash. B is willing to sell A his land for $500. A agrees and they engage in the transaction. After the transaction, A lost $500, but gained $500 worth of land so A still has $1000 of property. B lost $500 worth of land, but gained $500 in cash.
So before the transaction, each has $1000 of property (cash + land), and after the transaction, each still has $1000 worth of property (cash + land). It's just been shuffled a bit based on what each actor desired and what they were willing to pay for what they wanted.
In general, LOTS of transactions in the real world work this way, i.e., actors engage in the transaction to result in a net increase (perceived) of value to themselves. So the simulation is unrealistic in that respect: it assumes transactions in which one party loses are just as likely (if not more likely) than those in which the transaction only occurs if both parties win. In the real world, most transactions occur only if both parties feel the trade is a fair exchange of value (no net loss to either side).
Cash, of and by itself doesn't, though there are investment opportunities. It's a transfer and exchange medium.
The reasons someone would care to exchange land for cash could vary, but generally would indicate a need for liquidity. That could be because of a perceived profitable investment elsewhere, but could just as easily be the result of financial pressures (bad loans, business losses, poor financial management, a need to move, being forced from the land (refugee or other forms of political repression), etc.
Just because both parties benefit from a transaction doesn't mean that one doesn't end up with, net net, a better position afterward.
> Of all the third-world countries that have developed, they have almost uniformly made heavy use of protectionism, foreign-ownership limitations, etc.
Do you have a citation for that? I suspect it might just be trivially true because all countries, especially developing countries, make heavy use of protectionism for some definitions of "heavy". It would be useful to show a relationship between level of protectionism and economic growth. My impression is that most economists think that protectionism harms economic growth.
I pre-commit to changing my mind if there's a correlation between greater protectionism and greater economic growth.
As mentioned in the latest Gates letter, huge progress has been made on reducing global poverty recently, and it continues to be made. He says it's likely that there will be almost no poor countries by 2035.
"Bad Samaratins" has lots of citations, but just look at our exports:
One of America's biggest exports is civilian aircraft. I think for a while it was the US's #1 export in terms of profit.
It was also one of the most state-subsidized industries.
Giant aircraft presses can run into the "natural monopoly" problem, there are defense concerns with having military production happen in America, etc., so there are lots of justifications we can make for it. But a subsidy is functionally a tariff.
Ha-Joon Chang is a leading economist critical of much of the orthodoxy. Korean born, currently at University of Cambridge in London. He's studied under a prominent Marxist scholar though I'm not sure he's classified as same himself.
He's using the word 'wealth' in a imprecise, non-jargon sense that is something like money, or the open market value of all of a person's possessions, or the economist definition. Without teasing those apart it's hard to make any sort of economics simulation that will give results that are interesting in a practical sense.
But hey, Python has lots of cool packages that are useful here, which is the real point.
It's also flawed in that most transactions increase the wealth of both parties. Even though wealth in this context includes non-monetary factors, (e.g. I exchange my time for money), it still means that the interactions in the article (two people meet and one ends up with some proportion of the total money) are very unrealistic.
It might be a realistic simulation of professional poker players.
> actors transact only when the net outcome is more valuable to each of them
At least, the perceived value, but often times in real economies this does not match up with actual value at all. People hoping to better their fortunes end up making poor decisions to that end, particularly -- but certainly not limited to -- poor people without much financial savvy. This part of the simulation seems perfectly accurate to me.
Well, there are three things to think about. There's the current open market price of something, there's the actual subjective value of something, and there's the subjective value that the buyer hopes something will end up having before the transaction is made.
Poor people are certainly sometimes bitten by lack of savy, but more often bitten by the exigencies of their lives pushing them towards shorter planning horizons.
